Market Recap: Stocks Decline as Euro Drops Below $1.30

Markets closed down on Wall Street today:

• Dow -1.10 percent
• S&P -1.13 percent
• Nasdaq -1.55 percent
• Oil -5.20 percent
• Gold -5.20 percent

On the commodities front:

• Oil (NYSE:USO) dropped to $94.93 a barrel
• Gold (NYSE:GLD) falling to $1,576.60 an ounce
• Silver (NYSE:SLV) fell 7.68 percent to settle at $28.86

(Related: Merkel’s Cabinet Backs Bank Rescue Fund)

Today’s markets were down because:

1) Dollar: The dollar strengthened today as the euro declined to an 11-month low. The stronger dollar dragged down commodities priced in the U.S. currency. The drop in commodities hit shares of companies in the energy and materials sectors, including Caterpillar, Alcoa, and Exxon Mobil, taking a toll on the Dow.

OPEC’s decision to increase its production cap also took a toll on oil prices, which in turn hit companies like Chevron Corp. and BP.

2) Euro: Investors remained nervous today about the euro-zone debt crisis and increasingly tight credit conditions for banks across Europe, pushing the euro down below $1.30. While most EU leaders have agreed in theory to form a fiscal compact aimed at strengthening budgetary discipline, investors are worried that implementing the agreement could prove legally and politically difficult, as EU members ratifying the treaty would be essentially signing over their fiscal sovereignty.

3) Debt. U.S. stocks joined a global slump as the cost of insuring against default on European sovereign debt approached record highs. Italy had to pay the most in 14 years to sell five-year bonds in an auction today. The yield on Ireland’s 10-year bonds rose to 8.77 percent today, up from 8.06 percent a month earlier. Spain’s 10-year bond yielded 5.69 percent and the yield on Germany’s benchmark 10-year bund was 1.92 percent.

[Editor's note: the above is a cross post that originally appeared on Wall St. Cheat Sheet.]